Tag Archives: Financial planning

The full cycle in financial planning

Generation of proposals are part of the financial planning

Life is difficult to plan, but it is necessary to have some plans in certain circumstances. Plans cannot avoid troubles or negative surprises, but they can help deal better with them. This is the case of financial planning. What is it? The European Financial Planning Association (EFPA) explains that it “is usually a six-step process, and involves considering the client’s situation from all relevant angles to produce integrated solutions”.

The main target is knowing the customer in order to organise his or her finances for the whole life, so that the person reach his or her goals, keeps a similar standard of living and can manage unexpected events. The six steps listed by the EFPA are:

  • Establishing and defining the client and personal financial planner relationship.
  • Gathering client data and determining goals and expectations.
  • Analyzing and evaluating the client’s financial status.
  • Developing and presenting the financial plan.
  • Implementing the financial planning recommendations.
  • Monitoring the financial plan and the financial planning relationship.

Financial planning deals with all kind of assets (from cash to deposits, stocks or real estate) and life situations (worker, self-employee, retired, heritage). The main points are:

  • What are the main goals for the customer: is he or she planning to buy a house, save for the studies of the children, keep money with some annual returns for the retirement? We have to consider the age, the professional and the personal situation. Demands are not the same if the person is married or single or have one or several children.
  • What is the time horizon: after considering the goals, we have to think about a realistic time horizon to reach them. It will not be the same the timeframe for a house or for a car.
  • What is the risk profile: this is one of the main pillars, because the financial planner will propose the investment in appropriate assets. A conservative investor cannot receive a proposal with a half of the investments in stocks, for instance. There are several tools to profile investment risks, as the regulations are becoming harder to protect individual interests.

Individual investors can ask for the advice of a financial planner or be more independent using tools to organise their own plans. T-Advisor financial planner is one of the possibilities. What does an investor have to ask to this kind of tools?:

  • A chance to select different goals and time horizons.
  • An analysis of your risk tolerance.
  • A result with a range of possibilities from the more optimistic to the more pessimistic.
  • An analysis of tax and inflation effects.
  • A proposal of a combination of assets to reach your goal taking into account your risk tolerance and the time frame.

Nobody knows the future and financial planning will not avoid shocks. That is part of life. But financial planning can help organise your goals with a realistic view and react wiser to those shocks in order to keep a regular standard of living.

Investment exercise: planning my retirement

How will you get incomes when you get older? Will the public retirement system collapse or will it only give a very low monthly payment? Will my health be good or will I need a lot of money to pay hospitals, drugs or any kind of assistance? There are many uncertainties for our future after we will be 65 or 67 or 70 years old. It depends on the legal retirement age in each country. That is why it is necessary to take decisions as soon as possible to preview and plan your finances for that life period.

T-Advisor investment planner helps you find a plan for your retirement. First of all, we have to answer some questions:

  • The legal retirement age and the life expectancy
  • Your current incomes
  • How much you are going to invest at the beginning and every month
  • Your income level in your retirement and how much public pensions will contribute to it

Retirement planner in T-Advisor Selected life expectancy is the lowest in developed countries. This example accepts a loss in future standard of living and low incomes from the public pension. When you design your plan, be realistic considering your chances to save monthly. Think about several scenarios, as you can repeat the plan so many times as you wish. It is important to calculate different life expectancy scenarios, as you will have to deal with longer or shorter periods with the savings that you have kept before. The younger you begin, the more chances you have to enjoy a better standard of living in the future. After you enter your own figures, our investment planner will ask you about your investment profile: are you risk lover or averse? The higher risk, the higher possible performance… and possible losses. Let’s think you are conservative and prefer lower performances but lower chances to loss your money. If you are not sure, you can answer a short test. Investor profile in T-Advisor Finally, you have a chart with the result. In this case, you have very low probability to keep the selected standard of living. The chart also considers pessimistic and optimistic scenarios. These figures are obtained through statistical calculations based on historical data. You can always set the parameters to evaluate other cases. You have also advanced settings to evaluate inflation and taxes effects. Retirement scenario in T-Advisor planner If you enter, for instance, a higher monthly contribution, your success probability changes abruptly. Retirement scenario with monthly saving change in T-Advisor Last screen shows you a possible allocation of your initial contribution to your investment plan with a projection about highest annual gains and losses. Retirement plan proposal in T-Advisor Saving means to give up current consumption to keep money for future events. Future is always uncertain, but the future of retirement is more uncertain for everybody. If you think that you can survive from your future public pension, you can maybe make a mistake. Currently, there are different products in the market, but a plan for your own needs and situation is the best solution. Our investment planner is the first step for it.

Are you financial advisor? These are your tools!

Financial Advisor functionality picture in T-Advisor

T-Advisor is a software suite with a wide range of different tools for investors. The aim of T-Advisor is providing accurate, updated and relevant figures and data for agents in the financial system. We do not only think in particulars or individuals, but also in advisors, who will have access to all tools and an enlarged set of services. We have developed powerful tools to help advisors provide the best service to your customers.

T-Advisor for financial advisors offers a customized asset universe, so that professionals can choose and change the portfolios depending the situation and taking advantage from the best performances. The access to historical data is enlarged up to 20 years, so that advisors can perceive detailed trends from the assets they are interested in. We also give the chance to manage up to 100 portfolios, which is a reasonable number to design different solutions depending the customers’ profile.

But our main strength is our financial planning tool. Advisors may set a goal for the different customers in the short and long term. The tool also provides a savings plan to obtain the projected performance. First of all, professionals can set the investor profile, depending the risks ready to be assumed. T-Advisor has defined 5 different profiles, from more to less risk aversion: very conservative, conservative, moderate, dynamic and aggressive.

After defining the profile, the financial advisor accesses to different products recommended for him or her. The tool shows many kinds of charts, as the asset allocation or the performance and risks analysis. For instance, T-Advisor calculates automatically average performances for different periods, volatility and value at risks, amongst other functionalities. At the end of the process, advisors obtain a proposal report about the designed portfolio for the customer.

Of course, T-Advisor lets the professional watch, follow up, analyze and rebalance portfolios. Our strength lays on our deep knowledge of advisors’ tasks, needs and interests. We have developed a tool adapted to their daily work, making it easy, automatic and with a high-quality information so that professionals can react immediately to any market change. We are aware that technology is at people’s service and T-Advisor has been developed at investors’ and advisors’ service.

Financial planning: any new trend in sight?

Financial planning: Two hands squeeze a dollar. by T-Advisor

The immediate answer to the question at the top is clear: of course, a wide range of changes are taking places and creating next trends in the advisors industry. Beyond the crisis and the economic transformation that we all are living on, financial planning is moving through a wave of social and technological changes, apart from the effects on the current advisors’ tasks. We would like to underline the main ones:

  • The generation gap in the financial planning behaviour. People focus this behaviour linked not only with personal experiences, but mainly with social ones, conditioned by the economic and political environment (think about social security, health insurance or retirement). Older generations tend more to save money and healthy organize their accounts. Younger ones do not plan, design a budget or think so much about their future finances. Also, young people have less financial literacy and less knowledge about investment and financial products.
  • The influence of technology to plan our investments. Interactive experience, so experts, is going to be a very important trend in the next years. Tablets, mobile phones and apps are creating a self-sufficient little investor, who takes care for his money by himself from his device. Advisers will no longer control the planning experience and this trend will deeply change the industry. Moreover, sector companies will have to develop flexible tools for all devices and all kinds of browsers or operative systems, if they want to have a chance in the billion-app-world. By the way, they also will have to look heavily to the cloud.
  • The advisory industry will be conditioned by new ingredients. Technology will reduce costs to advisers, but also will pressure their customer fees. With the availability of new tools, private investors will access to markets at a very low price. But advisers should take the trend as a chance, because more people connected and interested in investments will be target for them if they are well-positioned. How? Taking into account social shifts in demography and longevity, which will create new priorities in investments. Apart of that, advisors will have to evolve into an all-in-one provider: tech tools, legal planning, career planning or even coaching.

To sum up, the advisory industry is facing a deep change in a changing world. Possibly, next three years are going to be critical and we are surely going to be witness of this transformation. Technology, effects of the social shifts linked to the end of the crisis and new players and models in financial planning are the main cards in this game.

Online platforms, a growing threat to traditional advisers

We would like to share this article that analyzes two latest reports about the growing popularity of web-based personal finance startups and discount brokerage platforms in wake of 2008 crisis.

We hope you find it interesting!

Online personal finance startups and discount trading platforms are not just for the do-it-yourself crowd anymore — and that poses a threat to traditional financial advisers, new reports from Corporate Insight and Cerulli Associates Inc. show.online platforms by T-Advisor

The last Corporate Insight study, takes note of more than 100 investing and personal finance startups with great appeal for younger investors. Nearly twice as many U.S. retail investors are using direct-to-investor platforms offered by discount brokerages such as The Charles Schwab Corp., Fidelity Investments and E-Trade than in 2008, when the financial crisis hit, according to the Cerulli report.

“As a member of Gen X/Y, I find obfuscated fees, wrap programs and commissions are a huge turnoff,” Bill Winterberg, a certified financial planner and publisher of the website FPPad.com, wrote in an e-mail. “The direct providers largely operate in this clear and simple pricing realm, so they’re poised to win more and more business.”

While discount brokerages have long appealed to do-it-yourself investors, their improved tech platforms and financial planning services now also appeal to mass-affluent investors who lost trust in big banks during the market meltdown. Add to that the growing popularity of online startups, and it’s clear that traditional financial advisers must now work harder to capture investors’ assets.

Corporate Insight’s report, “Next-Generation Investing: Online Startups and the Future of Financial Advice,” examined more than 100 investing and personal finance startups and found that they are redefining how investors get financial advice with scalable, low-cost solutions.

Among these startups are Jemstep, which offers automated “buy” and “sell” recommendations for client portfolios; Covestor, which allows investors to mimic the trades of professional investment managers; and LearnVest, which offers online-only personal financial adviser relationships without any face-to-face interaction.

To be sure, not all of these startups will succeed.

“The reality is that I looked at 130-odd startups and some of them will fail,” said Grant Easterbrook, a Corporate Insight analyst and the report’s author. “There is an attrition rate, especially as they are tied to the market. If the market tanks due to the euro or the Middle East or quantitative easing, customers will flee to the sidelines.”

Mr. Easterbrook added, however, that the proliferation of startups highlights the longer-term trend of baby boomers being replaced by Generation X and Generation Y investors.

“When you look at those Gen X and Y investors, they’re not as interested in face-to-face meetings, and they have a lot of negative perceptions about the major financial institutions,” he said. “These people don’t trust the big wirehouses.”

According to the Cerulli report, “U.S. Retail Investor Product Use 2013,” of the roughly $27 trillion in retail investor assets, $4.3 trillion now is on discount brokerage platforms — twice as much as in 2008. The advisory channels account for $15.4 trillion of that total, while channels such as non-adviser-sold retirement plans account for $4.5 trillion.

At $5.2 trillion in assets, wirehouses still control the largest slice of the advisory segment, but their influence is slipping. “The four firms that comprise the channel have lost overall market share in the last several years, but remain the most concentrated asset bases in the retail investing world,” Cerulli reported.

As online tools become more popular, however, assets will move away from wirehouses toward independent advisory channels, as well as direct distribution platforms, especially for mass-affluent investors with assets in the $500,000 to $2 million range, the Cerulli report predicted. Among the channels, registered investment advisers have seen “the most appealing growth” in the past four years, the report noted.

“The results, to me, signal the ongoing trend that began nearly 15 years ago — the ongoing rise of discount brokerage platforms [as they] continue to commoditize the core elements of creating and implementing portfolios,” Michael Kitces, partner and director of research at the Pinnacle Advisory Group and publisher of The Kitces Report and Nerd’s Eye View, wrote in an e-mail. “Advisers who are relying on generating commissions or fees from simply implementing basic passive, strategic portfolios, and regularly monitoring them, will be under increasing price pressure and competition. For most of them, the way out is to provide a deeper level of customized advice.”

You can read the original article here: http://www.investmentnews.com/article/20131030/FREE/131039983#